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Student Loan Rehabilitation

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Student Loan Rehabilitation

Trusted Student Loan Lawyers Serving Indianapolis and Central Indiana

Exorbitant student debt is a tragic reality plaguing millions of people in the United States. People take out loans to invest in their professional futures, but the investment comes at a heavy cost. Numerous individuals struggle with student debt for years, and some never pay off their loans. According to Forbes, 7% of student loan recipients will likely never pay off their loans based on their current debt payment trajectory. Additionally, there are over 44 million borrowers that owe a combined $1.5 trillion in student debts. 10.7% of those 44 million people are in default or are delinquent by over 90 days.

Many individuals’ student loans have gone into default status. Default status can be a massive burden on the individual. The list below outlines some of the many consequences of student loan default:

  1. Defaulted federal student loans are charged a higher rate of interest and can lead to additional late fees and charges by collection agencies.
  2. Defaulted federal student loans can garnish wages without a state court order. Specifically, they do not need a court order, like regular general creditors, to take funds out of your paycheck. Further, defaulted federal student loans can garnish social security.
  3. Defaulted federal student loans can lead to the intercept of your federal tax refund.
  4. Debt collectors collecting on defaulted federal student loans, may deduct collection charges of up to 20 percent of each payment.
  5. The U.S. Government can potentially prevent the renewal of a professional license due to defaulted federal student loans.
  6. Student loan delinquencies and defaults are often reported to the major credit bureaus, yielding negative items on credit reports.

Skilled student loan attorneys can present you with legal options for student loan debt relief. At Sawin & Shea, we provide Indiana residents with a comprehensive review of your options for student loan relief.

What you need for your Consultation

  • Call or text our office at 317-759-1483 to set a date and time for your consultation.
  • At least 3 days prior to your appointment go to studentaid.gov and download your student loan history report and email the information to StudentLoan@sawinlaw.com. We are not allowed by the law to gather this information for you, this information is necessary to determine your legal options.

At your appointment, you will meet with an attorney to review your student loan options and discuss available plans.

Types of Student Loans

Student loans are intended to give support to those looking to invest in education. Loans provide tuition, supplies, additional educational costs, and living expenses. Unfortunately, as time passes on your student loans, you’ll have to pay interest on the money you borrowed. Additionally, you may have to pay late fees and additional penalties that keep you from paying off your initial loan amount. You may end up paying large sums for late fees and other penalties without even making a dent in your actual loan.

There are two types of student loans that you need to be aware of because your student loan type determines your relief options. The two types of loans are:

  • Public student loans: Public student loans are obtained or backed by government agencies.
  • Private student loans: You receive private loans through banks, lenders, and other private financial institutions.

Public and private student loans differ significantly when it comes to loan relief options, and it’s critical that you know the relief options for both types of loans.

Options for Student Loan Debt Relief

There are different options of debt relief that loan recipients can use to overcome their difficult financial situations. With each relief option, you need to review eligibility rules and determine if it’s a good fit for your situation. You can evaluate your relief options with a student loan attorney.


Although this may sound extreme, bankruptcy can sometimes discharge your student debts if they’re causing you and your family financial hardships. A few factors dictate whether or not you can declare bankruptcy to absolve your loans. First, you need to be able to prove that you can’t maintain minimal standards of living and still afford to pay your student loans. This is not just what most would describe as financial hardship. It is more extreme than that. Second, you also need to show that the reasons why you’re unable to pay off your loans (the hardship) will continue for an extended duration of the payment period. Finally, you need to show that you’ve made a substantial effort to pay off student debts. This third factor is generally where Bankruptcy Courts find that unless you have availed yourself to income-based repayment options, you cannot get a discharge of the student loans.


When you refinance, you replace your current debt with a new loan that has a lower interest rate. Your new loan will be through a private lender regardless of if you had a public or private loan beforehand. To qualify, you’ll need a consistent income and a good credit score. Another important element to note with this option is that you can have a co-signer in your refinance plan, which can help you if you have bad credit.

Repayment and Income Based Repayment

Repayment options extend the period in which you pay off your loans by up to 25 more years. With repayment, your monthly payments will be lower, but you’ll pay more interest in the long run, meaning that you’ll end up paying more for your loan than before you entered the relief option. There’s also an income-driven repayment option that enables you to pay based on your income. Different factors determine your eligibility for repayment options, such as the type of loan, loan status, and family size.


The final relief option deals with loans in default. If you don’t qualify for loan repayment, you can go with this option, and after going through rehabilitation, you can sign up for a repayment plan. For rehabilitation, you need to pay a total of nine timely payments over the course of ten months, and your payments are based on the amount of your disposable income. Because you make nine payments over ten months, you’re allowed to miss one payment. After completing your ten-month rehabilitation period, you can explore the student loan repayment plan options.

What Loans Qualify for Rehabilitation?

Unfortunately, only public loans have the option of rehabilitation. Private student loans offered by banks, lenders, and other private financial institutions do not qualify for rehabilitation. Some eligible public loans include direct subsidized loans, direct unsubsidized loans, Federal Family Education Loans (FFEL), Federal Perkins Loans, direct consolidation loans, parent plus loans, and grad plus loans.

The first step you need to take when applying for rehabilitation is to check what kind of loan you have. You can go to studentaid.gov to find out your list of federal student loans as well as their repayment status. You can also view your credit report to find out whether you have a public or private loan.

If you’re considering rehabilitation, another critical note is that each loan is only eligible to go through the rehabilitation program one time. If you default on your loan after going through the rehabilitation program, you will not be able to repeat the program.

Benefits of Student Loan Rehabilitation

When your loan goes through the rehabilitation process, you can regain good standing on the loan. The rehabilitation program removes the history of your default from your credit report, but your late payments will stay on your credit report. If you have a U.S. Department of Education loan, they may also waive collection costs that were added to your public loan balance. Additionally, with any type of public loan, you can stop collection agencies from implementing harmful tactics, such as income tax refund offset, lawsuits, and wage garnishment.

After going through the rehabilitation program, you’ll also regain eligibility for student loan forgiveness programs, deferment and forbearance, repayment plans, and additional federal student aid.

Applying for Student Loan Rehabilitation

There are only two qualifications for the student loan rehabilitation program. These include having a federal (public) student loan in default and having not already completed the loan rehabilitation program. It doesn’t matter how long your loan has been in default, and your income is not a factor. Again, you need to ensure that you’re ready to keep up with your student loan after going through rehabilitation because you can’t repeat loan rehabilitation if your loan defaults again.

When applying for student loan rehabilitation, you need to ensure your eligibility by finding out which type of public student loan you have that’s in default. Next, you need to find out what agency has your loans. With this information, the attorneys at Sawin & Shea LLC can help you navigate the rehabilitation process and get you on the path to an affordable repayment plan.

Student Loan Rehabilitation Process

When working through the student loan rehabilitation program, you need to be prepared and dedicated to making your payments on time. You can fix your defaulted loans, but you must complete your payments on time in each designated period.

If something goes wrong and you fail to make multiple payments, you’ll need to restart the program, but there is a grace month because you’re making nine payments over ten months. Some people have had issues making payments because they failed to realize that their credit or debit card had expired, and they then have to restart the program to fix their defaulted student loans. You’re not allowed to fix a defaulted loan twice in the rehabilitation program, but if you failed to complete it the first time, you can restart it easily.

The rehabilitation program takes nine months to complete, but you have ten months to make nine total payments. You should also be aware that you need to make payments within 20 days of their due date.

Once you’ve made nine payments and completed all necessary paperwork, your loan will be rehabilitated, and you can start moving forward.

What Should I Do After My Student Loan is Rehabilitated?

After rehabilitating your student loan, it will take around 30 days for the defaulted loan to be removed from your credit report, but again, the late payments will still be on your credit report. Your credit report and credit scores (TransUnion, Equifax, Experian) will likely increase. Over time, you’ll be able to improve your scores further despite your late payments through making on-time payments to your loans and other debts. In addition to improving your credit report, your loans will also be sent to a new servicer.

Additionally, you’ll regain access to financial options and programs you lost because of your defaulted loan. You’ll have different monthly payments, which may be less expensive than they were before, and you’ll gain the option to request an affordable payment plan. You can use your discretionary income to fill out an application for a repayment plan that’s based on your income and expenses. You’ll also be able to apply for more federal financial aid in the future. Plus, you’ll no longer need to worry about wage garnishments, treasury offsets, tax refund offsets, and Social Security income garnishment. Finally, collection fees that accumulated on your loan may also be forgiven.

After finishing loan rehabilitation, you need to make sure that you don’t default again. You cannot go through the rehabilitation process twice on the same loan.

Contact Student Loan Attorneys

If you’re struggling with student loans, we encourage you to reach out to student loan lawyers. Whether you’re going through the loan rehabilitation process or you’re considering another option for financial relief, student loan lawyers can assist you through the process of becoming debt-free. Here at Sawin & Shea, LLC, we know that unmanageable debt can become overwhelming and affect every facet of your life.

Our attorneys can help you through the student loan rehabilitation process as well as other student loan relief programs and options. We help people with student loans move forward with life while also improving credit reports and financial situations.

If you’re ready to receive assistance with your student loans or if you want to learn more about how student loan attorneys can help, call us at 317-759-1483. You can also click here to schedule a free, no-risk consultation with one of our attorneys to review your situation.

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